Valuation of goods under rule 28 of CGST rule 2017

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This discussion explores the valuation of goods for inter-branch transfers under Rule 28 of the CGST Rules 2017. When the recipient branch is eligible for full input tax credit (ITC), the second proviso suggests the declared invoice value is deemed the open market value. This raises questions about whether goods can be transferred at zero value, as the tax impact for the government is nil. Experts suggest that while the tax impact might be neutral, a zero value could be rejected, and a nominal value like 'Re.1' might be accepted if the branch has no other exempted supplies and the receiver avails credit.

karan kumar

karan kumar (Querist)

12 January 2020 Dear Experts!
In case of inter branch goods transfer, it has been always queried that how to determine the value of goods. Whereas second proviso of rule 28 CGST rule state that Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services,
However In view of above explanation since the inter branch is distnict person also eligible for full ITC hence as per these proviso we can even transfer the goods at the zero value because it is stated that value declared in the invoice shall be deemed to be open market value'

Pls share your valuables views on this....

Thanks & Regards
Karan Kumar

Mahesh Paryani

Mahesh Paryani (Expert)

12 January 2020 As per my view, whatever stand you take whether it is one or x amount. in an overall view, the tax impact is nil to the government. (State or Center)
0 is not a value if you speak in common parlance. Hence, I feel 0 value would be rejected
Hence, what's the use of fighting over a matter for which the government does not have financial impact. However the entity may possibly have some cash flows impact for which it can fight over this

Madhukar N Hiregange

Madhukar N Hiregange (Expert)

13 January 2020 The branch should have no exempted supply [ nil rated, wholly exempted sec11 or non taxable supply] at all for invoice value say re.1 to be accepted. All transactions of supply if receiver avails credit are revenue neutral. However, GST has to be paid. After disputes in ITC , valuation diputes would be the largest inGST.

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